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Out of Chicago: Surveys, a Plan, New ISDA Directors

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CHICAGO (–At its annual general meeting, the International Swaps and Derivatives Association Inc. announced the results of its 2004 ISDA Margin Survey, showing a 41% increase in the use of collateral in privately negotiated derivatives transactions over the use reported in last year’s survey.

That’s an increase from US$719 billion in 2003 to US$1.02 trillion in 2004, according to a survey in which 97 firms responded. Of those respondents, ISDA said in a statement, 76 were banks, 10 broker-dealers and the remaining were institutional investors or end-users.

“The results demonstrate the continuing commitment of market participants to identify and reduce sources of risk in the derivatives business,” said Robert Pickel, ISDA’s executive director and chief executive, in the statement.

ISDA also released an analysis of credit exposure among derivatives dealers that, Mr. Pickel said, demonstrates the same point. On average, the analysis said, a major dealer’s five largest interdealer exposures total about 2% of its derivatives exposure. For the largest dealers, use of collateral reduces interdealer counterparty exposures to less than 10% of the original amount.

Also, for the largest dealers, almost all interdealer exposure is covered by the ISDA Credit Support Annex. For a wider sample of dealers, the coverage is about 90%.

ISDA also has released “Moving Forward: An Implementation Plan,” expounding steps to accelerate automation of over-the-counter derivatives processing. The plan divides the issue of automation into four parts: trade processing; verification and legal execution; matching, settlement and netting of payments; and portfolio management.

Finally, on this big Wednesday for announcements, ISDA made public the results of an election of its new board of directors. Of the 20 seats on the board, six weren’t at issue this year. Ten of the incumbents were re-elected. The four newly elected board members and their institutional affiliations are: Marcelo Castra, Grupo Santando Central Hispano, Madrid, Spain; Yusaku Manabe, Bank of Tokyo-Mitsubishi Ltd., Tokyo; Eraj Shirvani, Credit Suisse Girst Boston Europe Ltd., London; and Benoit de Vitry, Barclays Capital, London.

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